On the other side of the Atlantic, housing markets have already left the state of free fall. For example, recently published data suggest that the unexpected increase in new construction projects in June, up to seven peaks. Building permits, an indicator to predict activity in the near future, is also rapidly increasing. Meanwhile in Britain, various studies on the level of house prices can also say that the market has recently falling into the abyss, turned 180 degrees. For example, the Nationwide index rising for two consecutive months. In other parts of the world, we are pleased to see how out of piles of worthless arguments derived the theme of disengagement economies. China in the second quarter showed GDP growth at breakneck 7.9% in 2009, which exceeded expectations, which in themselves were quite impressive. In the presence of supporting factors, such indicators may be evidence that the global recession would soon enter into another phase, although a few months ago, it threatened to turn into the Great Depression new incarnation. Nevertheless, there is still a lot of work. Activity in the market is still very low, in addition, those who today in the UK decide to buy their first home, will not easy. On a mortgage loan that covers 100% of the cost of housing can not count. In the long run, this is certainly good, but now this situation depresses activity in the housing market. Activity in the manufacturing sector as the world was not high. Especially in light of recent data on the PMI index in Germany and the United States. Despite the discussion of so-called exit strategy, we still can not be sure what will happen to quantitative easing, when the time comes to raise the stakes.
Such contradictions reflect the peculiarities of the economic crisis. The reason for the crisis, at least, if for reasons of common sense, relates to the excessive vulnerability of the financial sector caused by the nedopustimyh lending policies of sub-borrowers in the U.S. housing market. Sekyuritizatsiya these loans and the apparent loss of confidence in these securities tsenynym led to the collapse of the financial system, unprecedented in the 1930's. Now, some financial companies have arrived again, sometimes even returning the money of taxpayers, which allows you to optimistic conclusions about the conclusion of the crisis. All this is true, but, alas, not the end of history. If someone gave a lot of credit, it means that someone took too much credit. One of the most important lessons of the so-called Japanese "lost decade" is the significance of excessive debts. Even when the banks are on their feet and can lend again, the process is not a dead letter due to a lack of wanting to borrow. In recent times, we only hear about the "sharp start" lending. I'm not sure that it will be very sharp.
To some extent, the problem has masked a lack of borrowers by financial incentives. When the private sector has shown reluctance to take loans, the state intervened in the case. Very well, if the recovery is within reach. But if the cost of private sector will not rise because of excess debt, governments have to face the difficult task of bringing its accounting in order. Politicians still be happy to dance on the thin ice of the debate. The Americans offered to focus on health reform, the British are discussing the advantages and disadvantages of tax increases and cost reductions. We have yet to take tough decisions. For example, in Britain, as far as possible to raise taxes? Do I need to increase VAT? What happens to the cost of education, health and helicopters in Afghanistan? Asceticism is not threatened by the popularity, but apparently this is the fee to be paid for the credit crisis.
Recent economic data makes the glass "half full", but it is possible that at the bottom of a glass crack through which ooze ostensible improvement in demand, not contributing to the stabilization of the economy as a whole. In many countries, business activity continues to be absent for a fact that increases the pressure on prices and wages. Good news ... for those who are close to the idea of flexibility in prices and wages. Supporters of the concept argue that it is better to cut all salaries, than to allow 10% of people lost their jobs. In general, this is so, but this argument slabeet in terms of reducing the interest rate to zero. At this point, further decline in prices and wages bear a heavy burden on those who have debts. People no longer spend, demand falls, and the labor market continues to weaken. Thus, the worst period of the crisis may already be behind us, but we have no reason to expect that we will return to the conditions that dominated prior to the ... at least in the United States and Great Britain.
In other parts of the world picture is somewhat more optimistic. I have already mentioned the rapid growth of China in the second quarter of 2009. My colleagues at HSBC in Hong Kong believe that the annual rate could reach 8%, and in 2010 - 9.5%. In the past China was linked with паразитированием on the American demand, odnoak, now the situation is rapidly changing: the country now relies more on domestic policy. Investment in infrastructure, including the expansion of the railroad, grew by 109% in the first five months of the year - an amazing shift, which entails an increase in demand for steel, cement, construction equipment, and so on. The rate of fall of the profitability of already declining, while beginning to show signs of growth in consumer spending. If you connect the internal power of China with a relatively relaxed monetary conditions outside the country, in regions prone to the impact of the credit crisis, get the recipe for rapid growth in domestic demand in some developing economies. This means that we vozvaschaemsya to the old theme of good separation. It is obvious that in developed countries vuntrenny demand sluggish for the foreseeable future. In fact, and the United Kingdom and the United States are experiencing a demographic crisis and debt, which affect the economy is not the most favorable way. This is illustrated by the example of Japan in the last twenty years. All the fun will be happening in other parts of the world. Some cause for optimism is still there, but this does not mean that the world economy recovered from the shock. Tragically this is to recognize the developed world, but most important, and lush green shoots appear in Asia and other developing countries. But it should be. Anyone who develops, sooner or later becomes developed.
Stephen King
managing director of economics at HSBC
Such contradictions reflect the peculiarities of the economic crisis. The reason for the crisis, at least, if for reasons of common sense, relates to the excessive vulnerability of the financial sector caused by the nedopustimyh lending policies of sub-borrowers in the U.S. housing market. Sekyuritizatsiya these loans and the apparent loss of confidence in these securities tsenynym led to the collapse of the financial system, unprecedented in the 1930's. Now, some financial companies have arrived again, sometimes even returning the money of taxpayers, which allows you to optimistic conclusions about the conclusion of the crisis. All this is true, but, alas, not the end of history. If someone gave a lot of credit, it means that someone took too much credit. One of the most important lessons of the so-called Japanese "lost decade" is the significance of excessive debts. Even when the banks are on their feet and can lend again, the process is not a dead letter due to a lack of wanting to borrow. In recent times, we only hear about the "sharp start" lending. I'm not sure that it will be very sharp.
To some extent, the problem has masked a lack of borrowers by financial incentives. When the private sector has shown reluctance to take loans, the state intervened in the case. Very well, if the recovery is within reach. But if the cost of private sector will not rise because of excess debt, governments have to face the difficult task of bringing its accounting in order. Politicians still be happy to dance on the thin ice of the debate. The Americans offered to focus on health reform, the British are discussing the advantages and disadvantages of tax increases and cost reductions. We have yet to take tough decisions. For example, in Britain, as far as possible to raise taxes? Do I need to increase VAT? What happens to the cost of education, health and helicopters in Afghanistan? Asceticism is not threatened by the popularity, but apparently this is the fee to be paid for the credit crisis.
Recent economic data makes the glass "half full", but it is possible that at the bottom of a glass crack through which ooze ostensible improvement in demand, not contributing to the stabilization of the economy as a whole. In many countries, business activity continues to be absent for a fact that increases the pressure on prices and wages. Good news ... for those who are close to the idea of flexibility in prices and wages. Supporters of the concept argue that it is better to cut all salaries, than to allow 10% of people lost their jobs. In general, this is so, but this argument slabeet in terms of reducing the interest rate to zero. At this point, further decline in prices and wages bear a heavy burden on those who have debts. People no longer spend, demand falls, and the labor market continues to weaken. Thus, the worst period of the crisis may already be behind us, but we have no reason to expect that we will return to the conditions that dominated prior to the ... at least in the United States and Great Britain.
In other parts of the world picture is somewhat more optimistic. I have already mentioned the rapid growth of China in the second quarter of 2009. My colleagues at HSBC in Hong Kong believe that the annual rate could reach 8%, and in 2010 - 9.5%. In the past China was linked with паразитированием on the American demand, odnoak, now the situation is rapidly changing: the country now relies more on domestic policy. Investment in infrastructure, including the expansion of the railroad, grew by 109% in the first five months of the year - an amazing shift, which entails an increase in demand for steel, cement, construction equipment, and so on. The rate of fall of the profitability of already declining, while beginning to show signs of growth in consumer spending. If you connect the internal power of China with a relatively relaxed monetary conditions outside the country, in regions prone to the impact of the credit crisis, get the recipe for rapid growth in domestic demand in some developing economies. This means that we vozvaschaemsya to the old theme of good separation. It is obvious that in developed countries vuntrenny demand sluggish for the foreseeable future. In fact, and the United Kingdom and the United States are experiencing a demographic crisis and debt, which affect the economy is not the most favorable way. This is illustrated by the example of Japan in the last twenty years. All the fun will be happening in other parts of the world. Some cause for optimism is still there, but this does not mean that the world economy recovered from the shock. Tragically this is to recognize the developed world, but most important, and lush green shoots appear in Asia and other developing countries. But it should be. Anyone who develops, sooner or later becomes developed.
Stephen King
managing director of economics at HSBC
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